Re Bayview Eatery Pty Ltd
[2024] VSC 382
•4 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 00218
IN THE MATTER of Bayview Eatery Pty Ltd (ACN 648 004 291) trading as La Bocca Trattoria
BETWEEN:
| AGL SALES PTY LIMITED (ACN 090 538 337) | Plaintiff |
| - and - | |
| BAYVIEW EATERY PTY LTD (ACN 648 004 291) trading as LA BOCA TRATTORIA | Defendant |
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JUDICIAL REGISTRAR: | Gitsham JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 4 July 2024 |
CASE MAY BE CITED AS: | Re Bayview Eatery Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 382 |
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CORPORATIONS – Court determination of a liquidator’s remuneration – Winding up of company set aside by court order – Objection by director of company to former liquidator’s remuneration – s 60-10(c) and 60-12 of the Insolvency Practice Schedule (Corporations), Schedule 2 of the Corporations Act 2001 (Cth) – Prima facie case that remuneration reasonable - Whether the director’s objections are valid – Remuneration approved at slightly reduced amount.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Hunt & Hunt | |
| For the Defendant | APAC Litigators |
Contents
A.. Introduction
B.. Facts
C.. Legal principles
D.. Is the Former Liquidator’s remuneration prima facie reasonable?
E... Are any of Mrs Thakur’s objections valid?
F... Quantum
G.. Other matters
JUDICIAL REGISTRAR:
A Introduction
By application dated 10 November 2023, the former liquidator of the defendant company seeks an order for his remuneration, costs and expenses.
For the reasons set out below I am of the view that save for a small adjustment to the former liquidator’s remuneration on two occasions, the costs incurred were otherwise reasonable and ought to be paid.
Mr Coyne (the now ‘Former Liquidator’) relies upon his affidavits sworn on 25 May 2023 (‘First Coyne affidavit’) and 8 November 2023 (‘Second Coyne affidavit’). Mrs Madhumita Thakur (‘Mrs Thakur’) relies on her affidavit affirmed on 22 December 2023. Both parties have filed written submissions and, at the parties’ request, the matter has been determined on the papers.
B Facts
Bayview Eatery Pty Ltd (‘Company’) carries on a business as an Italian restaurant, trading as La Bocca Trattoria. The restaurant is located at 121 Main Street, Croydon and employs two staff. Mrs Thakur was and remains the sole director, secretary and shareholder of the Company.
On 23 January 2023, AGL Sales Pty Ltd (‘AGL Sales’) applied for orders winding up the Company on the grounds of insolvency. The foundation for the application was the Company’s failure to comply with a statutory demand issued by AGL Sales on 6 December 2022 in the sum of $31,229.96.
The Company did not appear at the hearing of the application on 22 February 2023. Accordingly, a Judicial Registrar ordered the Company be wound up and appointed David Coyne as liquidator (‘Winding Up Orders’).
On 23 February 2023, solicitors for Mrs Thakur, notified Mr Coyne that Mrs Thakur was not previously aware of the statutory demand issued by AGL Sales; arrangements were being made for payment of the amount of the demand to AGL Sales; and Mrs Thakur had given instructions to appeal the Winding Up Orders (‘Appeal’).
The Appeal was filed on 27 February 2023 and set down for hearing on 1 March 2023.
On 1 March 2023, Delany J granted leave pursuant to s 198G of the Corporations Act 2001 (Cth) for Mrs Thakur to bring the Appeal in her capacity as sole director and shareholder of the Company; allowed the Appeal; and set aside the Winding Up Orders.
Relevantly, his Honour made an order that:
Within seven days of agreement or determination of the Former Liquidator’s reasonable remuneration, costs and expenses, the defendant shall pay such amount as agreed or determined to the Liquidator.
Mrs Thakur gave an undertaking to the Court, by her counsel to:
to pay the Liquidator’s reasonable remuneration, costs and disbursements occasioned by the orders made on 22 February 2023, within seven days of agreement or within seven days of determination of the remuneration, costs and disbursements by the Court.[1]
[1]Order of Delany J in the matter of Bayview Eatery Pty Ltd (ACN 648 004 291) trading as La Bocca Trattoria (Supreme Court of Victoria, S ECI 2023 00218, 1 March 2023).
On 25 May 2023, the Former Liquidator served Mrs Thakur with a Notice of Intention to Apply for Remuneration (‘Notice of Intention’) dated 25 May 2023 and the First Coyne affidavit.[2]
[2]See r 9.2(2) of the Supreme Court (Corporations) Rules 2023 (Vic).
On 5 July 2023, Mrs Thakur provided the Former Liquidator with her Notice of Objection to Claimed Remuneration (‘Notice of Objection’).
On 10 November 2023, the Former Liquidator filed this application together with the Second Coyne affidavit addressing the matters required under r 9.2(6) of the Corporations Rules when an objection is made.
Whilst the liquidation lasted about five business days, Mrs Thakur maintains her objections to much of the time spent by the Liquidator on each day. She has also challenged expenses and disbursements incurred in respect of the liquidation and the Appeal.
C Legal principles
Section 60-5(1) of the Insolvency Practice Schedule 2016 (‘IPS’),[3] entitles an external administrator to receive remuneration for necessary work properly performed in relation to the external administration. Section 60-10(1) of the IPS provides that a determination of an amount an external administrator is entitled to receive may be made by the Court where no determination has been made by resolution of either the creditors of the Company or a Committee of Inspection. Those conditions are satisfied in this case.
[3]Corporations Act 2001 (Cth) Sch 2.
The ultimate question for the Court is whether the remuneration claimed by the Former Liquidator is reasonable.[4] Section 60-12 of the IPS prescribes any or all of the matters the Court can take into account when determining whether the remuneration sought is reasonable. As will become apparent, the Former Liquidator’s claim for remuneration is a simple one. The liquidation commenced on 22 February 2023. By 28 February 2023, the Former Liquidator had been served with a Notice of Appeal to set aside the Winding Up Order. The liquidation ended by an order of this Court on 1 March 2023. The business of the Company was not complex nor were there extraordinary issues the Former Liquidator had to deal with. Accordingly, the matters contained in s 60-12 of the IPS which are relevant to this application include:
(a)the extent to which the work by the external administrator was necessary and properly performed;
(b)the period during which the work was, or is likely to be, performed by the external administrator.
(c)if the remuneration is worked out wholly or partly on a time-cost basis—the time properly taken, or likely to be properly taken, by the external administrator in performing the work.
[4]Re WITS Holdings Pty Ltd (in liq) [2021] VSC 179 (Matthews AsJ).
The legal principles applicable to making a remuneration determination are well established and not in issue on this application.[5]
[5]Venetian Nominees Pty Ltd & Ors v Mark Anthony Conlan & Anor (1998) 20 WAR 96; ACN 004 323 184 Pty Ltd v Spark [2002] VSC 353, [31]; Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v SakrNominees [2017] 93 NSWLR 459 (Bathurst CJ).
When determining a claim for remuneration the Court is not performing a ‘rubber stamping exercise’.[6] It must consider the nature and extent of the remuneration claimed and make an assessment by having regard to the work performed and the particular features of the external administration.[7]
[6]Re Graziers’ Investment Company Limited (in Liquidation) and GIC Holdings Pty Ltd [2020] VSC 8, [28].
[7]Re Aus Streaming Ltd (in liq) [2022] VSC 182, [26] (Hetyey AsJ).
In Re Pluton Resources Ltd,[8] Caporale JR set out relevant principles for determining the remuneration of an external administrator. In particular, at [17] he said:
Black J also summarised the applicable principles in Re Sakr Nominees Pty Ltd, where his Honour stated at [23] that: [T]he Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred by the liquidator. Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the ‘value’ of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries, the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors.
[8][2023] VSC 160 at [15]–[17] (citations omitted).
The initial task of the Court is to consider whether the Former Liquidator has made out a prima facie case that the remuneration claimed is fair and reasonable having regard to the evidence filed and bringing a fair and independent mind to bear on the relevant issues.[9]
[9]Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320, [18].
To that end, the Court’s role is not required to undertake a line by line review of the narrations in the billing record provided by the external administrator, and instead the Court should review the narrations in a broad way to satisfy itself that they support the other evidence led in respect of the claimed remuneration.[10]
[10]In the matter of Fearndale Holdings Pty Ltd (admin apptd) (recs and mgrs apptd) [2020] NSWSC 901, [38].
The evidence should be sufficient to enable potential objectors to review the amounts claimed and ascertain whether there are matters to which objection should be taken. Once a prima facie case is established, the Court can consider the validity of any objections.[11]
[11]IMO Traditional Values Management Limited (in liq) [2012] VSC 650, [18]–[25] (summarising the principles as set out in Thackray v Gunns Plantations (2011) 85 ACSR 144).
D Is the Former Liquidator’s remuneration prima facie reasonable?
The Former Liquidator claims remuneration in the amount of $26,850.60 (incl. GST) for the period 22 February 2023 to 31 March 2023 comprising:
(a)$16,718.00 (plus GST) for time costs incurred in the liquidation for the period 22 February 2023 to 1 March 2023;
(b)$1,500.00 (plus GST) for external disbursements incurred in the liquidation for a valuation obtained from Grays.com on 24 February 2023; and
(c)$6,191.64 (plus GST) for external legal costs.
Immediately upon his appointment on 22 February 2023 and until 1 March 2023, the Former Liquidator performed what I consider to be ordinary tasks in the liquidation. The Former Liquidator identified assets and reviewed valuations for plant and equipment. He engaged in correspondence with the director, relevant creditors and holders of any security interests. The Former Liquidator carried out administrative tasks such as conducting company searches; bank administration; preparation and lodgement of forms with the Australian Investment and Securities Commission (‘ASIC’) and the Australian Taxation Office (‘ATO’). The Former Liquidator’s staff attended the premises to speak with employees and determine whether the business should continue to trade. The Former Liquidator had regard to Court documents filed in the proceeding, to which the Company was a party.
Those tasks, categorised by subject matter, are summarised by the Former Liquidator as follows:
Tasks Hours Remuneration Assets a. identifying assets and reviewing valuations regarding plant and equipment;
b. correspondence with the director and other interested parties in relation to the sale of business;
c. identifying assets subject to specific charges;
d. liaising with creditors with registered security interests on the PPSR;
e. reviewing documentation regarding the security interest holders' right to register a security interest against the Company.
11.40
$4,694.00 Creditors f. investigations to ascertain creditors of the Company and liaise with creditors in regard to their claims;
g. receiving and responding to creditor enquiries;
h. notifying security interest holders of my appointment;
i. preparing the Declaration of Independence, Relevant Relationships and Indemnities.
1.00 $276.00 Investigations j. conducting and reviewing searches of the Company;
k. correspondence with Mercedes-Benz Financial Services in relation to its security interest registered in the PPSR;
l. correspondence with JDE Coffee in relation to its security interest registered on the PPSR;
m. correspondence with Square AU Pty Ltd in relation to their security interest registered in the PPSR;
n. correspondence and discussions with the former director and current director in relation to the Company's affairs, the winding up order and application to set aside the winding up order;
o. correspondence with the director's solicitors and reviewing material in relation to the application to set aside the winding up order;
p. discussions and correspondence with Hunt & Hunt Lawyers for ongoing legal advice;
q. attendance at court regarding the application to set aside the winding up order;
r. all correspondence, steps and procedures as required in the process of the reinstatement of the Company.
9.60 $5,761.00 Administration s. conducting and reviewing searches of the Company, property, shareholders and relevant third parties;
t. correspondence with director, creditors, insurance broker, financial institutions and utility providers;
u. document maintenance;
v. bank administration;
w. prepare and lodge ASIC forms;
x. ATO and other statutory reporting;
y. finalisation of the liquidation;
z. internal discussions regarding trade on of the Company's business;
aa. updated checklists with respect to administering liquidation.
13.00 $4,637.00 Trade on bb. attendance at the business premises to determine viability of trading and discussion with employees; and
cc. discussion with Mrs Thakur's representatives and Hunt & Hunt Lawyers in relation to trading.
2.70 $1,350.00 Total: $37.70 $16,718.00
The Former Liquidator uses a recording system called APS Accountable Technology to record time spent on tasks in the liquidation. A report produced from that system is in evidence and contains a list of all tasks performed; the employee who carried out the work; the employee’s position and charge out rate. I have considered each of these entries in considering whether the work performed is proportional and reasonable, in the manner described in Re Sakr Nominees Pty Ltd.[12]
[12][2017] NSWSC 668, [23].
The report provides a summary of the time spent by all professional staff. That summary is reproduced below.
Bayview Eatery Pty Ltd trading as La Bocca Trattoria
For the period 22 February 2023 to 1 March 2023Based on the summaries described above and my review of the time entries provided, I am satisfied that the remuneration claimed is fair and reasonable. Being so satisfied, I turn to the validity of any objections raised by Mrs Thakur.
E Are any of Mrs Thakur’s objections valid?
As previously described, Mrs Thakur provided the Former Liquidator with a Notice of Objection on 5 July 2023. The general effect of Mrs Thakur’s objection is that the amount claimed by the Former Liquidator is excessive considering the liquidation lasted less than five full business days and against the background of a foreshadowed Appeal.
In the Notice of Objection Mrs Thakur details her objections in respect of each day of the liquidation. The Former Liquidator has responded in the Second Coyne affidavit.
Day 1 – 22 February 2023
This was the day the Winding Up Orders were made.
Having been notified of his appointment as liquidator, the Former Liquidator identified and deployed professional staff in his office to commence work on the liquidation. The Former Liquidator says that Mr Sanderson and Ms Thomas (both Intermediate Accountants) set up the file on the Former Liquidator’s internal systems, allowing the Former Liquidator to promptly correspond with banks, creditors, service providers and authorities as necessary.
At the Former Liquidator’s direction, key correspondence in the liquidation was sent to:
(a)all relevant banks to request a freeze on bank accounts;
(b)utilities service providers;
(c)secured creditors;
(d)the State Revenue Office;
(e)the Australian Taxation Office;
(f)Mrs Thakur;
(g)the Victorian Commission for Gambling and Liquor Regulation;
(h)ASIC; and
(i)the Former Liquidator’s insurer.
(together called ‘Day 1 Correspondence’).
In addition to the above matters, ASIC and PPSR company searches were performed, together with Land Titles Offices searches and an ASIC Personal Name Extract search.
Each document with annexures is created by junior staff (such as Mr Sanderson and Ms Thomas) and the Former Liquidator reviews all correspondence to satisfy himself of its contents and gain a basic understanding of the operations of the Company.
Mrs Thakur objects to the Former Liquidator’s use of a number of employees to carry work out on 22 February 2023. She also complains of the nature of the work being ‘automated’. I take that to mean that work has been carried out in a standardised way that does not take into account the particular circumstances of this case.
The role of a liquidator upon her or his appointment is to take control of a company as soon as possible. That involves securing the assets of the company and taking such steps as are necessary to comply with the liquidator’s statutory obligations.
It is trite to say that on the day of an appointment, a liquidator is not aware of any particular circumstances of the company beyond the fact of their appointment. Through experience, she or he is however aware of the usual steps that need to be taken to satisfy themselves of these obligations.
The tasks undertaken by the Former Liquidator were usual and of the type expected by any liquidator in the performance of their statutory functions. I do not consider the work undertaken to be excessive or unnecessary.
The objection is refused.
Day 2 – 23 February 2023
The Former Liquidator says that on this day, and in accordance with his usual practice, he directed a senior staff member, Mr May and Ms Thomas, to attend the Company’s trading premises without notice to carry out the usual tasks of securing the books and records of the Company and the premises itself; inspecting the premises for assets; engaging and assisting valuers with access to the property; liaising with employed staff of the business; conducting interviews with management staff of the business; and assessing the Company’s financial position/performance/trading viability.
The Former Liquidator is informed by Mr May that when he and Ms Thomas attended the premises:
(a)both Mr May and Ms Thomas spoke to the staff about the Liquidation process and possible outcomes for the business (such as the business being sold as a going concern);
(b)Mr May also spoke to Mr Arakala Thakur, Mrs Thakur’s husband, at length about whether the Company could continue to trade; the Company’s cash at bank; ongoing payroll commitments; and whether the Company’s insurance requirements were up to date;
(c)Mr May also spoke to an employee who expressed an interest in purchasing the Company’s business and Mr May explained that process;
(d)the only document obtained from the business were two weeks of sales from the EFTPOS terminal (although the Former Liquidator did not expect those to be the only financial records); and
(e)the visit at the premises took over four hours.
The Former Liquidator also requested copies of the Company’s books and records and a completed Report of Company Activities and Property (‘ROCAP’).
Details of the attendance at the premises are recorded in a file note prepared by Ms Thomas and exhibited to the Second Coyne affidavit (‘Thomas File Note’). The Thomas File Note is date and time stamped ‘Thursday, 23 February 2023 12:30pm’. It records Ms Thomas’ attendance at the premises and discussions variously between Mr May, Ms Thomas, the Company’s employees and Mr Thakur as described above.
In addition to these matters, the Former Liquidator says that both he and Mr May each received a phone call from Mr Thakur on 23 February 2023.
In his affidavit the Former Liquidator describes his phone call with Mr Thakur. The Former Liquidator says that during the phone call he and Mr Thakur discussed the implications of the Former Liquidator’s appointment; how the Company came to be wound up and the options to trade on or sell the business. The Former Liquidator says that he raised concerns about continuing to trade the business, which he knew little about at that time, and told Mr Thakur that he would need a cash deposit of $50,000.00 if he was to continue trading. Mr Thakur told the Former Liquidator he considered such a deposit to be unreasonable.
The Former Liquidator exhibits a file note of the call prepared by a junior staff member, Blair Sanderson (‘Sanderson File Note’). The first page of the Sanderson File Note is headed ‘140 – Meeting between AJ (Former Director) and David @ 2:30pm – BS’. Underneath that heading is the time stamp ‘Thursday, 23 February 2023 4:24pm’. The Sanderson File Note does not refer to Mr May being present during that phone call.
The relevant time entries for work carried out on 23 February 2023 read as follows:
(a)For the Former Liquidator:
(i)‘disc with former director re possible sale’ (84 mins); and
(ii)‘disc with former director re company, review of corro from his lawyer and email to lawyes’ (96 mins).
(b)For Mr May:
(i)‘review P+E / stock on hand’ (90 mins);
(ii)‘discussion with director / other interested party with respect to sale of business’ (60 mins);
(iii)‘attend premises to assess trading business discussion with staff re. appointment of Court Liq’ (120 mins).
(c)For Mr Sanderson:
(i)‘File note on meeting with AJ (Former Director)’ (18 mins).
(d)For Ms Thomas, there is no narrative (5 hours, 12 mins).
For further context, Mrs Thakur says that 23 February 2023 is the day she first became aware of the Winding Up Orders. Mrs Thakur does not say precisely how she became aware of the liquidation but says that once aware, she immediately sought legal advice. On the same day, Mrs Thakur’s solicitors wrote to the Former Liquidator notifying him she intended to immediately appeal the Winding Up Orders. Mrs Thakur says she also requested that the Company be permitted to continue to trade and that the Former Liquidator cease incurring further costs.
The objections raised by Mrs Thakur can be placed in three categories: (a) objections to the time recorded in respect of discussions with Mr Thakur; (b) objection to the time recorded by Ms Thomas; and (c) objection to the time recorded by the Former Liquidator in relation to ‘day 1 responses’. It is convenient to deal with (a) and (b) together.
Discussions with Mr Thakur / Time of Ms Thomas
Mrs Thakur objects to:
(a)the Former Liquidator’s entries for 84 minutes and 96 minutes respectively in relation to a discussion with Mr Thakur about the sale of the Company’s business;
(b)the Former Liquidator, Mr May and Mr Sanderson all recording time in relation to the same discussion with Mr Thakur; and
(c)the absence of any narrative explaining Ms Thomas’ time.
The evidence as to what transpired on 23 February 2023 is not entirely clear.
The Former Liquidator’s evidence read together with the Sanderson File Note, supports a finding that one telephone call took place between the Former Liquidator and Mr Thakur.
In response to the objection that Mr May has recorded time for the same call as the Former Liquidator, the Former Liquidator says the following:
Mr May is the most senior staff member who is responsible for planning and control of all aspects of the liquidation and reporting directly to me. It is therefore important that Mr May either participates in important discussions or is otherwise briefed of them by me so that he is familiar with important issues arising in the liquidation.
The Former Liquidator does not explain which, if any, of the calls he and Mr May might have participated in together. The Sanderson File Note makes no reference to Mr May being on the call. There is no evidence of a second call involving the Former Liquidator. None of Mr May’s or the Former Liquidator’s time entries on 23 February 2023 refer to discussions with each other although they refer expressly to discussions with a ‘former director’.
Mr May records time spent on a discussion with Mr Thakur but there is no separate file note provided of that call. The narrative used by Mr May in the time entry is consistent with the Thomas File Note for the attendance at the premise with Mr May which says the following
JM discussion with AJ:
I spoke to AJ (company former director / manager) regarding the Company’s financial position
The restaurant had EFTPOS sales of $10k in the last week.
Payroll is $2.3k per week due on Thursday and $2k due on Monday (approx $5k per week).
The former director advised that cash on hand was approximately $280 and he would have to find the money to pay the wages.
AJ could not confirm if SGC or insurance had been paid in full.
I took control over the only key to the premises and the key to the cash register.
Whilst the Thomas File Note records a discussion between Mr May and Mr Thakur whilst Mr May was at the premises, Mr May appears to record this time separately to his time entry for attendance at the premises.
Surprisingly, there is no narrative at all for the time entry for Ms Thomas on 23 February 2023. That time entry is for 5.2 hours of work.
There is, however, evidence of the work Ms Thomas undertook:
(a)the Former Liquidator’s evidence that Ms Thomas attended the premises with Mr May on the Former Liquidator’s instruction;
(b)a file note of Ms Thomas’ attendance at the premises on the day exhibited to the Second Coyne affidavit; and
(c)the Former Liquidator’s evidence, as informed by Mr May and Ms Thomas, that Ms Thomas was at the premises for over four hours.
Having regard to the matters described above I find:
(a)the Former Liquidator and Mr May each had a discussion with Mr Thakur about the liquidation and possible sale of the business;
(b)the Former Liquidator’s telephone call with Mr Thakur is evidenced by the Sanderson File Note;
(c)there is no evidence of a second call between the Former Liquidator and Mr Thakur;
(d)Mr May was not on the call with the Former Liquidator and Mr Thakur, but did speak to Mr Thakur about the matters identified in the narrative of his time entry as evidenced by the file note taken by Ms Thomas. I infer that time entry forms part of Mr May’s attendance at the premises;
(e)Mr May’s attendance at the premises and the work carried out there are reflected in each of his time entries on that day. Together those time entries total 4.5 hours; and
(f)by reason of the Former Liquidator’s evidence that Mr May and Ms Thomas attended the premises together; Ms Thomas’ file note of the work carried out whilst she was in attendance; and Mr May’s time entries, I infer that Ms Thomas was in attendance at the premises for 4.5 hours.
Insofar as Mr Sanderson’s time is concerned, it is not an unnecessary duplication of work for Mr Sanderson to record 18 minutes of time to document the Sanderson File Note.
As a result of the above findings:
(a)I will allow the objection to the Former Liquidator’s time entry of 84 minutes. I have selected this time entry because I consider it most likely that the second entry (which also refers to the review of correspondence from Mrs Thakur’s lawyer) is the entry which includes all work carried out by the Former Liquidator on 23 February 2023;
(b)I will allow the objection to a portion of Ms Thomas’ time. That time should be reduced to 4.5 hours; and
(c)I do not allow the objection in relation to Mr Sanderson’s time.
Day 1 responses
Mrs Thakur objects to the Former Liquidator's entry for 48 minutes for ‘day one responses’.
The Former Liquidator says ‘day one responses’ refer to a register of responses to the Day 1 Correspondence referred to in paragraph 34 above. He says that this entry describes his review of each response to the Day 1 Correspondence to keep himself informed about the liquidation and deal with matters where appropriate. Copies of the Day 1 responses are exhibited to the Second Coyne affidavit and include responses from BankWest, AGL, Mercedes-Benz Financial Services, VicRoads, Westpac Group, Telstra, Suncorp, Square Australia, Sheriff’s Office Victoria, National Australia Bank, Macquarie, ING, HSBC, Energy Australia, Commonwealth Bank of Australia and Bidfood Australia, as well as results returned from PPSR and ASIC searches.
I have reviewed the Day 1 responses and am satisfied the time recorded is fair and reasonable. The objection is refused.
Day 3 – 24 February 2023
Mrs Thakur’s objections in relation to the work carried out on day three are that the time recorded is excessive, particularly given the nature of the correspondence sent by the Former Liquidator on that day. To explain this objection it is necessary to understand the context of the correspondence sent.
I have previously referred to a letter sent by Mrs Thakur’s solicitors to the Former Liquidator on 23 February 2023. That letter relevantly stated:
We advise that our client was not previously aware of the statutory demand or the winding up proceedings and upon becoming aware is now in the process of arranging for payment of the outstanding debt to the petitioning creditor.
We further advise that we have been instructed to file an application seeking to appeal the Orders dated 22 February 2023 and that this is expected to be filed tomorrow.
Our client instructs that she is not aware of any other creditors and it is anticipated that the appeal will be allowed. In the circumstances it is requested that the Bayview Eatery Pty Ltd (in liquidation) be allowed to continue to trade and that you cease incurring any further costs in this matter.
The Former Liquidator’s response was provided on 24 February 2023 (‘24 February letter’). That response said:
I advise that the Company will remain in Liquidation until the winding up Order is terminated by the Court. I note that the Company’s sole director, Ms Madhumita Thankur, has continuing duties and responsibilities with respect to assisting me as Former Liquidator of the Company, including completion of the Report on Company Activities and Property.
My review of the Company’s financial position suggests that the Company does not have the capacity to trade. I estimate that at least $50,000 would be required to underwrite the trading of the Company’s business for a period of up to three (3) weeks.
I am willing to trade the Company’s business in the Liquidation should your client provide me with $50,000 on a non-refundable and non-recourse basis. I note that trading performance will be reviewed on a weekly basis and the trade-on of the Company’s business may cease at any time and at my absolute discretion.
Following receipt of that letter, Mr Thakur telephoned the Former Liquidator. A file note of the telephone call is exhibited to the Second Coyne affidavit. During telephone call, the Former Liquidator and Mr Thakur discussed why a $50,000.00 contribution would be required for the business to continue to trade. Mr Thakur expressed his concern about delays with liquor licensing regulators. They discussed the possible sale of the business should that be considered an alternative to terminating the Liquidation. The telephone call concluded with Mr Thakur saying he would need to speak to his lawyer again.
Mrs Thakur objects to the preparation of the 24 February 2023 letter from the Former Liquidator because she says the letter is ‘unreasonable’ and the Former Liquidator ‘has no basis to demand the payment of $50,000 on a non-refundable and non-recourse basis, all the while reserving to himself the right to cease trading in his absolute discretion.’ Mrs Thakur says the offer contained within the letter was embarrassing.
Contrary to Mrs Thakur’s submission and having regard to the all the circumstances, the matters set out in the 24 February letter were neither unreasonable nor embarrassing. I say this for the following reasons.
At the time the 24 February 2023 letter was sent, the Former Liquidator had no access to the books and records of the Company. Mrs Thakur had not provided the Former Liquidator with a ROCAP. The only record in the Former Liquidator’s possession that demonstrated the financial position of the Company was the weekly cash receipt from the EFTPOS terminal obtained the day before. At that time, the Former Liquidator was entitled to assume there may be significant financial difficulties with the Company. The Former Liquidator says, and I accept, that he did not know if the Company was trading profitably and, in his experience, it is often the case that companies which have been ordered to be wound up are not trading profitably.
Furthermore, there was no guarantee at that time that an appeal would be filed and/or when any such appeal might be listed and heard. Whilst ultimately the appeal was both filed and heard in a timely manner, on 24 February 2023, those developments were still unknown.
The objection to time recorded by the Former Liquidator in respect of the 24 February 2023 letter is refused.
Mrs Thakur also objects to time recorded by the Former Liquidator and Mr May discussing the liquidation with the Former Liquidator’s solicitors, Hunt & Hunt. The Former Liquidator has given evidence that it is not unusual for Mr May to be involved in some discussions with him and third parties. He says that ensures that more than one staff member has direct knowledge of matters directly related to the liquidation. In my view, there is nothing objectionable about Mr May also charging a modest amount of time (18 minutes) for that call.
The objection is refused.
Day 4 – 27 February 2023 and the Appeal
A broad objection raised by Mrs Thakur in submissions relates to the nature of the Appeal.
The Appeal was filed in the Supreme Court on 27 February 2023 at 1:21pm. It was served on the Former Liquidator by email at 2:33pm who forwarded it to the Former Liquidator’s solicitors, Hunt & Hunt, at 2:44pm.
The Notice of Appeal was brought by Mrs Thakur as a non-party seeking leave under s 198G(3)(b) of the Corporations Act 2001 (Cth) on behalf of the Company to do so. The named parties to the appeal were AGL Sales and the Company.
In addition to leave being granted for Mrs Thakur to bring the Appeal, the following relief was sought:
(a)the Appeal be allowed;
(b)the orders of Woronczak JR made on 22 February 2023 be set aside;
(c)the originating process filed on 23 January 2023 be dismissed; and
(d)the defendant pay the plaintiff’s costs of and incidental to the proceeding, with such costs to be taxed in default of agreement.
The Notice of Appeal was supported by an affidavit affirmed by Ms Thakur on 27 February 2023 which confirmed that AGL Sales had been paid the debt owed to it plus its costs of the winding up proceeding.
The Appeal documents were served on the Former Liquidator under cover of a letter from Ms Thakur’s solicitors which relevantly stated:
Given that the debt has now been paid, it is our position that the Court will likely make the orders sought for the following reasons:
1. As stated in Bendigo and Adelaide Bank Limited v Grahame [2021] VSCA 222, an appeal from a determination made by a Judicial Registrar, as in this case, is to proceed by way of hearing de novo. That is that the matter is heard over again from the beginning and the Court is not confined the evidence presented at the original hearing.
2. As supported by both Deputy Commissioner of Taxation v Guy Holdings Pty Ltd (1994) 14 ACSR 580 and Bibald Consulting Pty Ltd (t/as Forstaff) v Miles Special Builders Pty Ltd [2005] NSWSC 397, where the debt the subject of the statutory demand has been paid after the filing of the application and where the original plaintiff at hearing is no longer a creditor, the application ought be dismissed.
In the circumstances it is our opinion that it is inevitable that the appeal will be allowed and the proceedings dismissed. Our client would accordingly seek your consent to the proposed orders sought and our client would offer to pay your reasonable costs should your consent be provided.
Mrs Thakur’s submission is put in this way. Since being put on notice of an appeal on 23 February 2023, she says that the Former Liquidator has proceeded under the misapprehension that she would be making an application to set aside or terminate the winding up order. Mrs Thakur says that because the Former Liquidator misunderstood the nature of the Appeal (i.e., a hearing de novo) he continued to perform work assuming that his opinion as to solvency would be required (as it is for an application to set aside or terminate a winding up). Mrs Thakur says that work incurred unnecessary and disproportionate costs, such as incurring a valuation on 24 February 2023; and/or spending time reading Appeal papers and observing the hearing on 1 March 2023.
The Former Liquidator says that, until orders were made setting aside the Winding Up Orders, he considered it necessary to perform ‘limited and necessary tasks’ in order to keep remuneration and costs to a minimum.
I will address the particular complaints concerning the valuation and time spent on the Appeal below. However, whilst I generally accept that the Former Liquidator appears to have proceeded on the basis that the ‘appeal’ Mrs Thakur foreshadowed on 23 February 2023 was an application to set aside or terminate the winding up, I do not accept that the misunderstanding led to the Former Liquidator incurring unnecessary costs.
Mrs Thakur’s objection to the time recorded on this day reads as follows:
27 February 2023
The junior accountants log a total of 2.0 hours, Mr May 0.7 hours and the Former Liquidator a total of 2.2 hours, making a total of $2,200. Again, the charges are excessive.
Given the liquidator’s heavy involvement, it is unclear why Mr May logs time to review the notice of appeal documents.
I have reviewed the time entries recorded by the junior staff (other than the Former Liquidator and Mr May). Those entries are for ordinary tasks required to be performed in the liquidation. No time is dedicated to work which would be required of a liquidator on an application to terminate the winding up (as opposed to an Appeal). There is nothing unusual or excessive about the entries.
I have reviewed the time entries recorded by the Former Liquidator and Mr May in relation to the (now filed and served) Appeal.
(a)there does not appear to be any objection to the Former Liquidator’s time – only that Mr May also recorded time; and
(b)Mr May records 0.4 hours to ‘review material re. winding up order set aside application’. For the reasons I have previously identified concerning Mr May carrying out similar work to the Former Liquidator, this work is not objectionable. The balance of Mr May’s time (0.3 hours) is spent on the usual work carried out in a liquidation.
Accordingly, Mrs Thakur’s objections to the work carried out on day 4 are refused.
Day 5 – 28 February 2023
Mrs Thakur objects to the Former Liquidator spending 36 minutes reading submissions filed on her behalf in the Appeal. The objection is taken in light of $7,077.00 claimed by way of disbursements for legal costs.
Disbursements, such as legal costs, are costs incurred by the solicitor acting for the party. The costs sought by the Former Liquidator are reasonable costs incurred in the performance of his obligations as liquidator of the Company and a party to the Appeal. Until such time as the Winding Up Orders are set aside, the Former Liquidator is responsible for the actions of the Company including to provide instructions in relation to any proceedings to which the Company is a party. In my view, it is entirely appropriate that a liquidator review court documents such as appeal documents and submissions so that he might give proper and fulsome instructions to his solicitors. Furthermore, I do not consider the time spent by the Former Liquidator reading the appeal submissions to be excessive.
The objection is refused.
Day 6 – 1 March 2023
Mrs Thakur objects to the Former Liquidator spending 0.9 hours attending the hearing of the Appeal. Again, time spent by the Former Liquidator attending the hearing of an Appeal is not unreasonable or excessive. There is no basis for the objection raised in relation to this entry.
F Quantum
Former Liquidator’s time costs
For the reasons I have identified above I will reduce the quantum sought by the Former Liquidator to reflect:
(a)a reduction of 84 minutes of the Former Liquidator’s time (day 2) = $910.00; and
(b)a reduction of 42 minutes of Ms Thomas’ time (day 2) = $154.00.
My order will include that Mrs Thakur pay the Former Liquidator’s reasonable costs in the sum of $15,654.00 (plus GST) for time costs incurred in the liquidation for the period 22 February 2023 to 1 March 2023.
Disbursements
The orders of Delany J on 1 March 2023 provided that:
Within seven days of agreement or determination of the Liquidator’s reasonable remuneration, costs and expenses, the defendant shall pay such amount as agreed or determined to the Liquidator (emphasis added).
The undertaking given by Mrs Thakur by her counsel on 1 March 2023 was:
to pay the Liquidator’s reasonable remuneration, costs and disbursements occasioned by the orders made on 22 February 2023, within seven days of agreement or within seven days of determination of the remuneration, costs and disbursements by the Court (emphasis added).
There seemed to be some contention, on the written submissions of the parties, as to the Court’s power to determine or otherwise approve disbursements.
It is clear that the Court does not have the power to ‘determine’ disbursements under s 60-10(1)(c) of the IPS. It has, however, been accepted that there may be an alternative source of power to approve a liquidator’s expenses under s 90-15 of the IPS or the inherent jurisdiction of the Court.[13]
[13]Graziers’ Investment Company at [82]; Deputy Commissioner of Taxation v Starpicket Pty Ltd (No. 2) [2013] FCA 699 at [15]-[21]; Twenty-Seventh Android Pty Ltd [2019] VSC 563 at [155].
In Graziers’ Investment Company Limited (in Liquidation) (ACN 095 401 200) and GIC Holdings Pty Ltd (in Liquidation) (ACN 095 351 590),[14] (‘Graziers’) Hetyey JR (as his Honour then was) held that:
Whilst the liquidators will likely have an equitable lien over the assets of the Companies to secure payment of the disbursements incurred and do not strictly need the benefit of an order of the Court, for the avoidance of any doubt, I am prepared to make an order pursuant to s 95-15 approving the sundry expenses in Graziers which are claimed as part of this remuneration application.
[14] [2020] VSC 8, [83].
The amounts in dispute between the parties are modest. They concern the recovery of:
(a)$1,650.00 (incl. GST) in respect of a valuation obtained by the Former Liquidator from Grays.com on 22 February 2023; and
(b)$7,077.00 (incl. GST) in legal costs and disbursements incurred with the Former Liquidator’s solicitors, Hunt & Hunt.
Valuation
Mrs Thakur says that the valuer, Grays.com, was engaged prematurely. In particular, Mrs Thakur complains that the valuer should not have been engaged prior to any discussions the Former Liquidator had with her. With respect, that submission does not appreciate the tasks required of a Liquidator upon a forced liquidation of a company. Rather, it seems to be made with the benefit of hindsight.
The Former Liquidator engaged Grays.com on 22 February 2023, the day of the Winding Up Orders, to value the inventory and assets of the Company and prepare a report to assist the Former Liquidator in carrying out his duties. Grays.com attended the premises on 23 February 2023, together with Mr May, and provided a valuation report on 24 February 2023.
As a matter of prudent practice, a valuation of the type obtained is required by the Former Liquidator for the purposes of professional indemnity insurance. Obtaining a valuation quickly and early in the liquidation permits the Liquidator to determine how best any assets might be realised and to do so as quickly as possible. There are also sound reasons why any liquidator would take such steps before talking to the director of a company forced into liquidation by a Court order. It is imperative that a Liquidator secure the assets of a Company placed into Liquidation as quickly as possible. I accept the Former Liquidator’s evidence that in his experience, giving officers or employees of a Company advanced notice of attendance at the premises increases the risk of assets and/or books and records being removed and IT systems locked. Whilst I accept that did not occur in this matter and that ultimately because the Winding Up Orders were set aside the valuation was no longer required, those events only have an effect in hindsight. At the time, the Former Liquidator was acting in a manner consistent with his obligations as a Court-appointed Liquidator. I consider the costs of Grays.com in the sum of $1,650.00 to be reasonably and necessarily incurred.
For the reasons set out above and consistent with the approach taken in Graziers, I consider it appropriate that I make an order under s 90-15 approving the sum of $1,650.00.
Legal costs
Legal costs do not ordinarily form part of the Court’s assessment pursuant to an application for remuneration under s 60-10 of the IPS. However, the Former Liquidator seeks an order that such costs are paid and Mrs Thakur has engaged and asked the Court to adjudicate on the question. Whilst there is no formal application, I am satisfied the Court has the power to determine the question.[15]
[15]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 84.02(3)(b).
Mrs Thakur says that the legal costs incurred by the Former Liquidator are excessive. In particular she objects to:
(a)counsel’s whole day fee for the day of the court hearing on 1 March 2023; and
(b)the legal work carried out by more senior lawyers exceeding the amount of work performed by junior lawyers.
I have considered the invoices of counsel and Hunt & Hunt as evidenced by the Former Liquidator.
In relation to counsel’s fees, it is clear that the work carried out by counsel extended beyond an attendance at the hearing before Justice Delany on 1 March 2023. The narrative of the invoice reads:
Reading brief, conference with instructors, telephone and email instructors and client (multiple), telephone with opposing counsel, preparing for and appearing at hearing of appeal before Delany J on 1 May [sic] 2023 (1 day).
Whilst a rolled up narrative is not always ideal in identifying the appropriate amount of time spent on particular tasks, in my experience the nature of the work undertaken by counsel including his attendance at the hearing on 1 March 2023 warrants the fee charged for one days’ work. I consider that cost to be reasonably incurred.
I have also reviewed the time entries of the solicitors at Hunt & Hunt who performed work on the matter from 24 February 2023 to 9 March 2023. The work carried out by Hunt & Hunt is generally confined to the following matters pertaining to the Appeal:
(a)work commenced on 24 February 2023 with 6 minutes of time recorded for a telephone call with the Former Liquidator; reviewing a letter to Mrs Thakur’s solicitors (0.1 hours); and reviewing court documents (0.1 hours);
(b)work performed on 27 February 2023 consisting of 36 minutes of time recorded for a telephone call with the Former Liquidator; email correspondence with the Former Liquidator (0.1 hours) and Mr May (0.1 hours); 12 minutes of time recorded for a telephone call with Mrs Thakur’s solicitors; reviewing court documents (0.3 hours); and drafting a letter to Mrs Thakur’s solicitors (0.8 hours);
(c)work performed on 28 February 2023 involved settling amendments to a letter to Mrs Thakur’s solicitors and emailing the same (0.2 hrs); reviewing correspondence received from Mrs Thakur’s solicitor (0.1 hours); a telephone call with the Former Liquidator about the Appeal hearing and briefing counsel (0.3 hours); reviewing Mrs Thakur’s submissions on the Appeal (0.2 hours); and various emails to the Court, counsel and the Former Liquidator in advance of the Appeal (0.4 hours);
(d)on 1 March 2023, the solicitors engaged in correspondence between the parties and the Court (0.3 hours); prepared for and attended the hearing (1 hour); and attended to various matters after the hearing including updating the Former Liquidator and considering draft orders for the Judges’ associate (0.4 hours); and
(e)following the hearing, further legal costs were incurred in respect of the final orders received; a final call with counsel; and an email to the Former Liquidator and Mrs Thakur’s solicitors in respect of remuneration and costs (together 0.7 hours).
I consider these legal costs to be appropriate in respect of the work undertaken on the Appeal. The work performed on 24, 27 and 28 February 2023 was appropriately performed by Mr Scott. Whilst he is a senior lawyer, he is best placed to give quick and cost effective advice in relation to these matters at the commencement of the Appeal. The invoices show that when appropriate, junior solicitors were engaged to communicate with the Court and attend the hearing. Mr Scott only engaged in further work when it came time for correspondence on the question of remuneration and costs.
G Other matters
The Former Liquidator seeks a number of ancillary orders in respect of the application for approval of remuneration.
First, he seeks an order that Mrs Thakur be joined to the proceeding as a defendant by reason of the undertaking given by her to pay his remuneration, costs and expenses. Secondly, he seeks an order dispensing with the requirements of this application to be served on other creditors in circumstances where the winding up order has been set aside.
No objection is taken by Mrs Thakur to either of those orders being made. I consider it appropriate that I make them.
I will hear from the parties on the question of costs.
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